Equities and the Economy

Good morning. Equities slipped yesterday with the Dow closing down 17 points at 18,030, the S&P 500 falling 1 to 2,100 while the Nasdaq managing to eke out a gain of 7 to 4,906. All chatter. Now remember, the S&P is at record highs, the Dow is close to a record high and the Nasdaq is at its highest level since March 2,000. This, in technical parlance, is called resistance. Traders sell resistance (and buy support). That’s the area you take profits. At a minimum, you certainly don’t buy at resistance. You buy once it breaks through resistance. You need something fundamental to break resistance. And we haven’t had any fundamental data this week that’s viewed as bullish to push us through resistance. So we’re in a period of consolidation, which, my friends, is a heck of a lot better than a correction. This assumes (and isn’t there always a caveat) that no bearish fundamental news pops up.

The Dow and S&P had the ball and chain of the energy sector restraining them yesterday with the likes of Exxon Mobil and Chevron Corp leading the decliners. The former stock suffered from an explosion at its refinery near Los Angeles and both fell on lower oil prices. There was some fundamental economic data released yesterday. The Fed reported that Industrial Production rose 0.2% in January which was a bit below expectations. Also, the Commerce Department reported housing starts fell to an annualized rate of 1.07 million units in January from December which was in line with what economists had expected. The Fed released the minutes of its last meeting and the interpretation was that the Fed will continue to be patient about raising interest rates. Verrrrry patient. So patient that investors interpreted the minutes that instead of rates rising this summer it may be delayed even into 2016. This, unsurprisingly, sent the U.S. dollar lower vs. other currencies.

This morning is, for the 3rd day now, starting out choppy with equity futures trading on either side of unchanged. The market still has its eyes on the Greek/German discussions over the formers debt. It is profligacy vs. fiscal rectitude. As I stated previously, this will not be resolved until the 23rd hour, 59th minute, 59th second of February 28th which is when Greece’s bailout program expires. If not later!

Oil

Oil fell yesterday with traders taking profits ahead of the weekly API and DOE reports with WTI losing $1.39 settling at $52.14 and Brent falling an even 2 bucks closing at $60.53. Remember this follows crude’s blistering rise of 35% over the past month. But let’s move quickly on to this morning for there’s new news and it’s material. After the close yesterday the API released its weekly crude and products inventory report (a day late due to the holiday) showing U.S. crude inventories rose 14.3 million barrels from the previous week. To say this was a shocker is not hyperbole. The numbers were so preposterously large that I thought they were fictitious. The API reported that crude inventories rose 14.23 million barrels, gasoline inventories rose 1.3 million barrels and distillates (diesel, jet fuel) fell 2.7 million barrels. The aggregated sum was an increase of 12.9 million barrels or a stunning 14.1 million barrels more than the five year average and 12 million more than last year. As expected, WTI is getting whacked this morning being down $2.53. Now we have to wait for today’s DOE report for as I’ve said many times, reporting to the API is voluntary while reporting to the DOE is mandatory.

Courtesy of MDA Information Services LLC

Natural gas

I’m sorry to report to you folks in the eastern U.S. that the weather forecast turned slightly colder yesterday pushing natural gas prices up 7.2¢ to $2.831. Actually, the forecast didn’t really get much colder, it’s just that the cold (or the “freeze your keister off” cold!) will be hanging around longer. Cash prices are extremely strong on the coattails of the record breaking cold with Chicago trading $10.20/MMBtu, Boston $21.00 and New York $35.37. That folks is called “pipeline constraints” where there’s not enough pipeline capacity to serve the market demand with balance having to be pulled out of storage. Next week’s storage withdrawal number is going to be a whopper!

Today and tomorrow are expected to be the coldest days of the period although as you can see in the weather map the intense cold will remain for at least 10 days and then only shift to below normal. Don’t shoot the messenger! So on all this bullish weather news natty is trading……….. down 0.5¢

Today is Thursday which means its EIA natural gas storage report day. The market is expecting a withdrawal of 108 Bcf which is way below last year’s withdrawal for this week, 247 Bcf, as well as below the 5 year average of 180 Bcf.

Elsewhere

As we all know, divorces can be very messy affairs. The one between Alan Markovitz and his ex-wife must have been a doozy. The give-away that the Detroit native was shall I say “unhappy” about the terms of his divorce might just be that he bought a house right next to his ex-wife’s, and then erected a giant sculpture of a middle finger that is permanently pointed towards his ex’s house! The sculpture is even highlighted at night with a big spotlight! Holy Toledo! Have a nice day.